FundRobot » Bond Funds » Problem about Annuities, Stocks, Bonds?

Old   #1 (permalink)
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Default problem about annuities, stocks, bonds

a. Find the FV of an Annuity of $900, one at 12%, N 33, and another at 8%.
FV at 12% = 308,187. FV at 8% = 131,356. Total FV 439,543

b. Find the FV of 20,000, N 33, R 3%. That's 53,047

c. The PV (at age 65) of an Annuity of 53,047, N 20, R 8% is 520,823

d. Nope
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Old   #2 (permalink)
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Default problem about annuities, stocks, bonds

At age of 32, Sandra Gonzales has decided to invest $1800 per year for 33 years until she is 65, in her retirement plan. She has also decided to place one-half of the funds in a stock index fund that roughly tracks the return on Standards and Poors. The other half of the funds will be placed in a mutual fund containing bonds.

a.Find the amount she will have at 65 assuming the stock fund averages 12% per year compounded annually and the bond fund averages 8% per year compounded annually. Using 33 periods find the value in the table corresponding to 12% and 8%.

b.The amount found in part (a) seems like a lot of money. But Gonzales knows that inflation will increase her cost of living. She wants to see the effect of 3% annual inflation on her financial goals. Find the income she needs at age of 65 to have the same purchasing power as an income of $20,000 today.

c.Gonzales wishes to fund her retirement for 20 years (from age 65-85). Find the present value of the annual income found in part (b) assuming that the funds earn 8% per year compounded annually.

d.Will her expected savings from part (a) fund her retirement at a purchasing power of $20,000 per year in today’s dollars?
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